The Eurozone economy finished 2017 at a high note, with annual growth coming in at 2.5%, the highest figure since 2011. The outlook for 2018 looks good as well, likely prompting us to upwardly revise our forecasts soon.

The breaking down of ‘Jamaica’-coalition talks last night brings unprecedented political uncertainty to Germany. Political initiative and control is moving away from Merkel towards the President, Frank-Walter Steinmeier, who can ultimately trigger new elections.

While Merkel was the unsurprising winner of yesterday’s elections, the outcome suggests a shift in the German political landscape as the populist far-right AfD came in third. The process of finding a workable coalition starts now, but we may not see a new government before Christmas.

We expect growth to remain healthy for the rest of this year before declining slightly next year. Merkel will likely be re-elected for another four-year term after elections in September. She is benefitting from the strong German economy.

Angela Merkel is set to win a fourth term as chancellor, thanks to the strong German economy. Her choice of coalition partner will have ramifications beyond Germany. We see a renewed Grand Coalition as the most likely. They may make progress on Eurozone integration.

The Dutch economy grew by 1.5 percent in Q2 and outpaced the solid growth in other Eurozone economies. Labour market figures in Q2 were also strong. Domestic and foreign demand can continue to drive a cyclical recovery.

Eurozone (core) inflation is likely to stay low for longer. This is driven by lower wage growth for an extended period of time and give cyclical and structural explanations. This means the ECB is unlikely to raise interest rates before 2019.

Global economic growth expected to outperform 2016 both this year and in 2018, but geopolitical developments still pose downside risks. Rising current account imbalances are hindering a powerful recovery.

Macron won the French presidency on Sunday. Markets apparently fully priced in his victory. Much of his economic success now depends on his new party’s performance in the June parliamentary elections. There are three main scenarios for government formation.